1 eFX Daily colour

1.1 US

(Jan-30) The FED recently decided to keep interest rates unchanged. This decision comes amid ongoing concerns about inflation, which remains above the Fed’s 2% target. The current federal funds rate is maintained at a range of 4.25% to 4.5%. President Trump has criticized the Fed’s decision, arguing that lower rates are necessary to boost the economy. However, the Fed is taking a cautious approach, assessing the impact of inflation and potential economic policies.

1.2 ECB

(Jan-27) The market expects the ECB to cut its benchmark deposit rate by 25bps to 2.75% on Thursday[30th of Jan]. This would be the fourth consecutive rate cut as the ECB aims to support the eurozone economy and manage inflation.

1.3 SA

(Jan-27) The SARB is expected to cut interest rates by 25bps this week[30th of Jan] following last weeks softer-than-expected inflation print. Currently repo is at 7.75%.

(Jan-28) The market has stabilized, and the rand has improved following the DA reaffirmation of their commitment to the GNU. This comes after weekend reports suggested instability within the GNU due to the President signing a new law facilitating state land expropriation.

(Jan-29) ZAR still under pressure until SARB announcement.

(Jan-30)

  • President C. Ramaphosa convened a Cabinet Lekgotla on January 29-30, 2025, to review government progress and set the agenda for the seventh administration. The focus was on finalizing the Medium-Term Development Plan (MTDP) 2024/2029, with priorities like inclusive growth, job creation, poverty reduction, and building a capable state. Key discussions included practical actions for MTDP priorities, economic and global outlooks, reforms in global institutions, and funding for SMMEs and students in the “missing middle.” The outcomes will shape policies announced during the State of the Nation Address on February 6, 2025. The Lekgotla also addressed South Africa’s G20 Presidency, emphasizing global economic stability and policy influence.

  • SA has called for an immediate ceasefire in the DRC amid intense fighting. Eleven SA soldiers were killed, prompting evacuation efforts. Diplomatic efforts are ongoing to push for a ceasefire and humanitarian access, with concerns over civilian casualties in Goma remaining high.

1.3.1 USDZAR levels

  • At 1 PM (Jan-27), the ZAR surged past our resistance level of 18.60, driven by idiosyncratic risks linked to the expropriation bill. This upward movement is notable given the concurrent decline in the dollar index and gains in gold prices, both of which typically support the ZAR.
    • Manqoba [RMB’s Research Analyst] notes that the weakening correlation between gold and the South African Rand (ZAR) is expected, given the significant decline in gold mining output. As this downward trend in production continues, the correlation and its impact on terms of trade are likely to diminish further.
  • The ZAR regains some ground (Jan-28) after the DA confirmed its commitment to the GNU. The ZAR is now trading below 18.70, signaling a positive market response to this news.
  • When we broke the 18.60 lvl at 1PM (Jan-27), the implied topside was 18.87 and we later traded a high of 18.86 on (Jan-28). Thus our updated usdzar range is 18.87 [up 27cents] - 18.50 [up 10cents]. Notice the topside is up 27cents from prior topside range while the bottom is up just 10cents, this is indicative of the topside pressure on the ZAR.
  • (Jan-30) Topside on the ZAR revised higher to 18.94 and bottom at 18.40. Yesterday (Jan-29) we saw a pull back in volumes, about 30% lower than the recent ADV as the mkt was anticipating the FEDs decision [kept rates the same]. After the SARB and ECB today, we expect to see volumes pick up again as the market incorporates new information to price relevant risks.

1.3.2 USDZAR spreads

  • (Jan-30) SARB cuts by 25bps

1.4 Key events this week:

  • Eurozone ECB rate decision, consumer confidence, unemployment, GDP, Thursday US GDP, jobless claims, Thursday
  • Apple, Thursday [At the back of DeepSeek]
  • ECB rate decision followed by news conference by President Christine Lagarde, Thursday
  • SARB rate decision, Thursday
  • US personal income & spending, PCE inflation, employment cost index, Friday

2 Africa

2.1 Update

By sizwe Mfayela - Institutional Sales Specialist (Jan-30)

  • Egypt
    • Prime minister Mostafa Madbouly announced a new oil discovery in the Suez Gulf, estimated to be 5000 bpd.
    • Egypt has awarded a tender to Glencore, BP and TotalEnergies for the supply of four LNG cargos between February and March.
  • Ghana
    • Ghana is in negotiation with 60 international banks to restructure $2.7bio of commercial loans. The finance ministry has signed a memorandum of understanding with the lenders to formalise the debt restructuring.
    • The Bank of Ghana reported an increase in their petroleum funds, boosted by strong oil revenues to $1.4bio in 2024.
  • Nigeria
    • Ratings agency S&P says Nigerian banks face significantly higher risks than African peers because of higher inflation and interest rates. Nigerian banks also have higher credit loss ratios as well.
  • Eurobonds
    • SSA curve closed with two-way flows for the most part. The street spent much of the day battling to find clearing levels with the opening ramp tighter being noticeably faded. In the fade we did see support from locals in the belly of KENINT, and NGERIA. As a result, the market closed a bit more two-way flows in those two ahead of FOMC, but overall, the street is still a happy seller into strength.

3 FX Volatility Update

3.1 Update

By Thuto Mukena - Institutional Sales Specialist (Jan-30)

  • Overview

The Fed held steady at 4.25% as widely expected, with Chair Powell striking a balanced tone—acknowledging the economy’s resilience and easing inflation while signaling no rush to adjust policy. Markets took it in stride, with the local currency extending gains and closing firmer at R18.5131/$. In options space, front-end vols softened, with 1-week implied shedding 98bps, the biggest drop amongst front end implied vols. That said, the tenor is still pricing in some uncertainty and continues to trade at a premium to the 1-month implied vol, with the spread currently sitting at 0.95 vol p.p. Heading into today’s session, attention turns to the SARB rate decision, where consensus calls for a 25bps cut to 7.5%. While the outcome is largely expected, markets will be paying close attention to the vote split and the committee’s tone for clues on the policy path ahead.

  • EM & G10

It was a see-saw session across both EM and G10 FX, with mixed performance on the day. The ZAR and COP took the top spots among gainers, while the RUB lagged at the bottom of the leaderboard. 1-week implied vols eased across both spectrums as the Fed rate outcome faded into the background, with uncertainty receding. In EM, USD/MXN and USD/CNH 1-week implied vols dipped 72bps and 32bps, respectively. In G10, implied vols tracked spot moves across most pairs, USD/CHF and AUD/USD 1-week implied vols shedding 31bps and 120bps, respectively, from the open.